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Ten Years of Bribery and Bad Tomatos

In ten years of tomato racketeering and bribery, it was probably inevitable that food safety would take a back seat at California-based SK Foods. But with the federal grand jury indictment Thursday of the former owner and chief executive officer of SK Foods it became clear that willfully selling impure food was a central aspect of the racketeering enterprise.

And buyers of those tomatoes who were on the receiving end of bribes totaling more than $330,000 worked for such top national brands at Kraft Foods Inc., Safeway Inc., Frito-Lay North America and B&G Foods. It is also a story of wiretaps, international intrigue, and tough talk.

All the pieces of this “Racketeer Influenced and Corrupt Organization Act (RICO)” prosecution have fallen into place since the Feb. 4th arrest of Frederick Scott Salyer, SK’s former CEO, by FBI agents at Kennedy International Airport. Salyer, in an ironic ending twist to the case, was returning to the United States for a 24 hour stay when he was arrested.

After several of SK Foods employees and customers plead guilty in the tomato bribery scandal, Salyer left the country. According to federal prosecutors, Salyer planned to relocate abroad permanently and had transferred millions of dollars to accounts in the Caribbean and Liechtenstein. He was looking into how to obtain permanent resident status in Uruguay, Paraguay, Andorra, and France.

But he was apparently not aware that federal agents had obtained a sealed arrest warrant for him in early January, and for reasons that are unclear, he arrived at in New York on a flight from London on Feb. 4th. He was booked on a return flight the next day, but FBI agents met his incoming flight and arrested him.

Among the seven-count grand jury indictment Salyer is now facing are charges of adulteration and misbranding of food. Court documents show multiple “racketeering acts” where mold counts were falsified and production dates were changed.

Prosecutors say SK Foods was unable during 2007 to provide processed “low mold” tomatoes, so Salyer purchased tomatoes from a competitor he knew were “high mold” and ordered an employee to “misbrand the adulterated high mold paste and allocated the high mold paste to domestic SK Foods customers.”

The customer the “high mold” tomatoes were sent to was Kraft, but the documents sent with them were falsified.

The 54-year old Salyer, who resided in Pebble Beach, led SK Foods LP into bankruptcy in May 2009. Singapore-based Olam International purchased its assets.

The Criminal Investigation units of the U.S. Food and Drug Administration (FDA) and the Internal Revenue Service (IRS), the FBI, and the Antitrust Division of the U.S. Justice Department are involved in what they call “a joint and extensive investigation” that is continuing.

In the RICO Act indictment, Salyer is accused of being on top of a racketeering enterprise that regularly paid bribes to purchasing managers of its corporate customers to make sure they bought tomatoes from SK Foods. The customers they bribed then bought at above market prices. Sometimes SK paid bribes to obtain proprietary bid information.

The indictment says Salyer was the leader of the racketeering enterprise and he directed a widespread practice of “selling and shipping processed tomato product that did not meet contractual specification, contained mold levels in excess of thresholds established by FDA and was thus unsalable domestically.”

Indeed, Randall Lee Rahal, the former SK salesman who is awaiting sentencing after pleading gulity, became concerned about just how bad the company’s tomato products had become, saying “We pack garbage for them anyway and they always take it, but we’ve hit new lows.”

A key to bringing Salyer down appears to be the related indictment of Steven James King, the 46-year old vice president of SK Foods. He has agreed to plead guilty to one count of food adulteration and misbranding and cooperate with the investigation in exchange for a lighter sentence.

Federal prosecutors, led by Assistant U.S. Attorney Sean C. Flynn, have obtained guilty pleas from four other SK Foods executives and from former employees of other companies including Safeway, B&G Foods, Frito-Lay, and Kraft Foods.

Only 60-year old Robert Watson, who worked for Kraft, has been sentenced. He was ordered to pay $1.858 million in restitution and sent to prison for 27 months. Most of the others will be sentenced on May 4.

SK Foods was involved in bribery over tomatoes from 1998 through 2008, according to court documents.

UPDATE: Anthony Ray Manuel, 57, of Turlock,CA plead guilty to wire fraud and filing a false tax return. His plea was for embezzling approximately $1 million from Morning Star Packing Co. when he was working there prior to his employment at SK Foods. Food Safety News did not intend to imply that Morning Star Packing was in anyway involved in the SK scandal. It was in fact a victim of one of the defendants.

Shekhar
Please see this article which has appeared in Food Safety News regarding the indictment of Scott Salyer

Richard Jennings

This is a terrible out turn for Fred Salyer who is the epitome of good character and hard work. Scott is a rascal and always was one, too clever for his own good. Many people who were involved in the business, as I once was, are not surprised at Scott’s comeupance.